Guoco sells insurance unit to sister company for $152m

PUBLISHED : Thursday, 13 January, 2005, 12:00am
UPDATED : Thursday, 13 January, 2005, 12:00am

Guoco Group has sold its general insurance arm, Dao Heng Insurance, to sister company Allstate Health Benefits, a Malaysian-based insurer owned by Hong Leong Assurance (HLA), for $152.6 million, according to a report filed with the Hong Kong stock exchange on Tuesday.

The deal will be settled in cash, according to Guoco's statement. The company's senior management was unavailable for comment.

Guoco and HLA are controlled by Malaysian Quek Leng Chan's Hong Leong Group.

'The purpose of the proposed disposal is to pool together the relevant insurance business resources and expertise within the [Hong Leong Group] to create the synergy for the benefit of future business development of both Dao Heng Insurance and HLA,' the statement said.

Nevertheless, the transaction is bound to fuel speculation that Guoco is on its way out of Hong Kong, a rumour that has been doing the rounds since the group sold its 71 per cent stake in Dao Heng Bank, its flagship business, to Singapore's DBS Group Holdings for $46.3 billion in 2001.

For the past few years, investors have been left playing a guessing game over what Guoco is planning to do with the huge pile of cash generated from disposing of its key asset.

The group management's reluctance to give hints about the long-term strategy of what is left of the group - a small securities trading and margin-financing arm - only fuels the rumours.

One theory widely circulated in Singapore's media is that the group has been considering the purchase of another lender to relaunch a Hong Kong financial services business, with International Bank of Asia and Chekiang First Bank rumoured to have been targets.

Yet, others have questioned the theory's fundamental validity - if the group were serious about its prospects in Hong Kong, why would it make a bid for a marginal player after disposing of well-run Dao Heng Bank?

The two small lenders have since been scooped up by Taiwanese financial services group Fubon Financial Holdings and local rival Wing Hang Bank, respectively.

Shares of Guoco rose 0.67 per cent to close at $75 yesterday.